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Altra Industrial (AIMC) Tops on Q2 Earnings, Hikes '21 View

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Altra Industrial Motion Corp. AIMC delivered better-than-expected results for second-quarter 2021. Its earnings surpassed estimates by 8.54%, whereas sales exceeded the same by 4.41%. The earnings beat is the company’s sixth consecutive quarter of healthy bottom-line results.

The machinery company’s non-GAAP earnings in the reported quarter were 89 cents per share, surpassing the Zacks Consensus Estimate of 82 cents. The bottom line increased 48.3% from the year-ago quarter’s 60 cents.

Revenue Details

In the reported quarter, Altra Industrial’s revenues were $488.6 million, reflecting an increase of 21.9% from the year-ago number.

Foreign currency translation had a positive impact of 4.7 percentage points. Organic sales in the reported quarter expanded 17.2%, driven by healthy business in the majority of the end-markets, including factory automation, heavy-duty trucks and specialty machinery.

Also, the company’s revenues surpassed the Zacks Consensus Estimate of $468 million.

On a geographical basis, the company’s organic sales expanded 27.3% year over year in North America and increased 17.4% in Europe. However, sales in the Asia Pacific/Rest of World decreased 2.9%.

Altra Industrial reports revenues under two heads — Automation & Specialty, and Power Transmission Technologies. A brief snapshot of the segmental sales is provided below:

Revenues generated from Power Transmission Technologies amounted to $237.6 million, increasing 21% year over year. Organic sales in the quarter expanded 16.1% year over year.

Automation & Specialty’s sales were $252 million in the second quarter, up 22.4% from the year-ago reported quarter. Organic sales increased 18% from the year-ago quarter.

Margin Profile

In the reported quarter, Altra Industrial’s cost of sales increased 21.5% year over year to $312.7 million. Notably, cost of sales represented 64% of net sales. Non-GAAP gross profit was $175.9 million, up 22.7% year over year. Gross margin (non-GAAP) increased 20 basis points (bps) year over year to 36%.

Selling, general and administrative expenses (non-GAAP) increased 29.7% year over year to $75.2 million and represented 15.4% of net sales. Research and development expenses (non-GAAP) were $16.1 million versus $14 million in the year-ago quarter.

Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $102.6 million, the margin being 21%. Non-GAAP operating income in the reported quarter increased 18.5% year over year to $84.6 million, with non-GAAP operating margin decreasing 50 bps to 17.3%.

Net interest expenses totaled $16.5 million in the reported quarter, reflecting a decrease of 12.2% from the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the second quarter of 2021, Altra Industrial’s cash and cash equivalents were $277.8 million, increasing 11.4% from $249.4 million recorded in the last reported quarter. Long-term debt was $1,359.3 million, reflecting a 2.1% decline from $1,388.3 million in the last reported quarter.

In the first half of 2021, the company repaid $50 million of borrowings under its term-loan facility.

In the first half of 2021, it generated net cash of $100.1 million from operating activities, up 35.8% from the year-ago period. Capital invested for purchasing property, plant and equipment totaled $17.5 million, increasing 1.2% year over year. Non-GAAP free cash flow was $56 million versus $64.4 million in the year-ago quarter.

Dividends

In the first half of 2021, the company paid out dividends amounting to $7.8 million, down from $22.3 million distributed in the prior-year period.

A couple of days before the earnings release, the company announced that its board of directors approved the payment of a quarterly dividend of 8 cents per share. The dividend payment for the third quarter will be made on Oct 4, 2021, to shareholders of record as of Sep 17, 2021.

Outlook

Altra Industrial believes that a healthy demand environment will be advantageous in the second half of 2021. However, supply-chain issues along with inflation in raw materials, logistics and labor costs are worrying.

For 2021, the company increased its financial projections. Sales are now projected to be $1,890-$1,920 million, higher than $1,820-$1,850 million mentioned earlier.

Non-GAAP earnings are expected to be $3.30-$3.46, up from the previously stated $3.09-$3.24. Also, non-GAAP adjusted EBITDA is likely to be $395-$405 million, up from $380-$390 million stated earlier. The tax rate is still anticipated to be 21-22% versus 20-22.5% mentioned previously.

Cash flow from operations is expected to be $260-$290 million in 2021 (versus $250-$280 million stated earlier), while capital expenditure is likely to be $50-$55 million (maintained). Free cash flow (non-GAAP) is predicted to be $210-$235 million, up from $200-$225 million mentioned earlier.

Altra Industrial Motion Corp. Price, Consensus and EPS Surprise

Altra Industrial Motion Corp. Price, Consensus and EPS Surprise
Altra Industrial Motion Corp. Price, Consensus and EPS Surprise

Altra Industrial Motion Corp. price-consensus-eps-surprise-chart | Altra Industrial Motion Corp. Quote

Zacks Rank & Other Stocks to Consider

With a market capitalization of $4 billion, Altra Industrial currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the industry are Nordson Corporation NDSN, The Middleby Corporation MIDD and Applied Industrial Technologies, Inc. AIT. While both Nordson and Middleby currently sport a Zacks Rank #1 (Strong Buy), Applied Industrial carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the companies improved for the current year. Further, earnings surprise for the last reported quarter was 28.48% for Nordson, 9.82% for Middleby and 35.64% for Applied Industrial.


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